Calls for end to “priority access”

EU Energy Commissioner Günther Oettinger says Germany must review its Renewable Energy Act (EEG) immediately after the elections in September. He specifically has his eye on priority grid access for renewables. But Craig Morris says there is always “too much” renewable power for power firms.

A few weeks ago, there was word that Brussels wanted to look into the exceptions to the renewables surcharge and the grid fee that Germany grants to energy-intensive industry. Then, Brussels announced that investigations would not start until the fall, probably to give Chancellor Merkel time to create a new coalition after the September elections (further evidence that the current coalition is at a logjam). Now, Oettinger says the newly elected coalition should quickly review the entire EEG before Brussels steps in.

What’s the problem? When talking about Germany’s progress with renewables, international onlookers have focused almost exclusively on the level of feed-in tariffs – how much Germany pays for renewable power. But the law itself, the EEG, is actually called the Act on Granting Priority to Renewable Energy Sources (here’s the official translation, PDF).

Basically, all renewable electricity has to be bought. Admittedly, there are exceptions, where power lines cannot take up all of the electricity generated, but as of 2011 we were only talking about far less than 1% of total wind power. And because solar power production largely coincides with power demand, the issue is less critical with solar anyway (aside from the possibility of individuals lines being overloaded). Biomass units are dispatchable, so they can simply be ramped down. The issue seems to have died down for wind power since 2011, for I have not seen a discussion or any figures for 2012 (but feel free to use the comment box if I have missed something).

Oettinger is thus not concerned about Germans having to pay for a lot of renewable power not used. Rather, green electricity is doing what the conventional power sector long said was impossible: offsetting demand for fossil and nuclear power. As a result, conventional plants are running at lower capacity – and making lower profits.

The standard criticism is that Germany is paying top dollar for renewables regardless of whether the power is needed at a given moment, and the result is unprofitability for dispatchable capacity, which Germany will always need; for the time being, it is fossil and nuclear, but one day it, too, could be renewable, such as syngas.

But we need to be careful – the one thing that can bring the energy transition to a halt is revoking priority access. Power companies will then simply claim (correctly) that they do not need the power; they may not, but the energy transition does. One reason Ontario did not go further with its feed-in tariffs (FITs), despite the attractive pricing, was because priority grid access was not always a given.

Spain’s FIT+bonus system might be a good compromise. Basically, years ago the Spanish implemented a low FIT designed to cover costs, but not provide a profit. Power is sold on the grid, so profitability depends on whether the electricity is needed when it is generated.

This model could be an incentive for power storage and virtual power plants. If properly designed, Oettinger’s proposal could help shape a future market that would facilitate the energy transition. If poorly designed, it would allow large utilities to refuse to purchase green power if they can argue that they didn’t need it at that time. The energy transition would then come to a screeching halt.

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Definitioner

Energy-intensive

Energy-intensive: In Germany, firms that consume a lot of energy and face international competition are largely exempt from the surcharge to cover the cost of renewable power. To be eligible, companies have to consume at least 10 GWh per year to fall into the category of "privileged industry." In 2011, some 300 energy-intensive firms paid 0.05 cents per kWh to cover the cost of German feed-in tariffs for 90 percent of their power and only paid the full surcharge of 3.52 cents for the first 10 percent; everyone else paid 3.52 cents per kilowatt-hour extra for all of their power. Furthermore, if a firm consumes at least 100 GWh per year and power costs make up more than 20 percent of total production costs, it does not even have to pay the full surcharge for the remaining 10 percent of its consumption.

Dispatchable

Dispatchable: dispatchable power plants are simply those that can be switched on and off and ramped up and down to meet power demand. Gas turbines are the most flexible, though modern coal plants also ramp up and down well. Older coal plants prefer to be switched on and left running near full capacity, as do nuclear plants.
Like gas turbines, generators running on biomass are generally quickly dispatchable, but they are the only type of new renewable source that can be considered dispatchable in Germany. Wind and solar are considered "intermittent," meaning that they do not produce power all the time, though power production can be reliably predicted at least a day ahead. Most importantly, wind turbines and photovoltaics cannot be "dispatched," i.e. switched on and off.
Aside from hydropower, the only other renewable sources of electricity that are dispatchable are geothermal and concentrating solar power, which Germany does not have in large quantities.

Grid access

Grid access: one obstacle to the growth of renewables is a lack of grid access. German law specifies that renewable electricity has a priority on the grid, meaning that conventional power generators have to ramp down production. Other countries more easily allow wind turbines and solar arrays to be disconnected to protect the profitability of conventional plants. Furthermore, German law specifies the conditions under which grid operators must expand the grid to provide a connection for wind turbines, biomass units, and solar arrays. Otherwise, investments made in renewables could come to naught if the grid operator fails to provide a connection.